Merging with Sumitomo Pharmaceuticals and joining the Sumitomo Chemical group (2005)

How a company begun by subscription chose to end

A company started with ¥100,000 pooled by twenty-one drug merchants chose, 106 years later, not to buy another drug candidate but to acquire a parent. Thin in proprietary compounds, able to run only one clinical development programme abroad, outsold three to one on a drug it had co-developed — the weakness visible in 2004 was not the kind that a single injection of capital removes. The calculation, it appears, was that unless the earning power itself moved under different capital, the company’s turn at the next new drug would never come. This was a merger designed from the admission that it could not win alone.

That the decision looks so unencumbered may be because Dainippon Pharmaceutical never had a single master. A company born of a subscription had no founding family to protect and no non-negotiable doctrine of independence — and, by the same token, little resistance to handing over a majority of its shares. When people involved at the time called Sumitomo Chemical’s promise to hold that majority for ten years a “guarantee of identity,” it was because they knew which side of the arrangement they were now on. The strength the merger created went four years later into a $2.6bn acquisition, and beyond that the company would take on a different kind of weight.